A taxpayer incorrectly took a $5,000 deduction (e.g., incorrectly calculated depreciation) in 2019 and as a result, his taxable income was reduced by $5,000.The taxpayer discovered his error in 2020.The taxpayer must add $5,000 to his 2020 gross income in accordance with the tax benefit rule to correct for the 2019 error.

Question

Quizplus · Accepted Answer

The tax benefit rule generally applies to refunds of previously deducted items, not to corrections of errors. To correct a mistake like this, the taxpayer would need to file an amended return for 2019, not adjust their 2020 income.

A Taxpayer Incorrectly Took a $5,000 Deduction (E